Enam picks up 10 per cent stake in MRF

Mumbai: Enam Securities, a well-known securities firm, has reportedly picked up 10 per cent stake in MRF Tyres, a leading tyre manufacturer. But Enam has denied any attempt to take over the cash-rich company, describing the deal merely as an investment-oriented one.

Of the 10 per cent, while Enam has picked up 5.31 per cent shares for itself, the balance 4.70 per cent has been acquired by it on behalf of its clients. The deal, apparently completed at Rs 500 per share, is considered attractive by knowledgeable sources. Citing reasons, the sources said MRF had posted a net profit of Rs 64 crore on sales of Rs 2,352 crore during the year ended 30 June 2001, beating a universal slowdown.

On a small equity capital of Rs 4.24 crore, its earnings per share stands at Rs 151, reserves at Rs 502 crore and the book value at Rs 1,200 per share. Acquiring shares at a price less than half the book value is attractive, the sources said.

The south-based MRF Tyres is promoted by the K M Mammen Mapillai family, which officially holds 18.48-per cent stake in the company and another 6.56 per cent along with persons 'acting in concert.'

MRF has always been considered attractive by investors, largely due to its small-equity, huge earnings per share, strong reserves and book value, and conservative approach of its promoters. However, its price-to-earnings ratio has traditionally been on the lower side, largely due to the company's reputation of being a non-shareholder-friendly one. Reportedly, the company has failed to reward its shareholders with bonus shares in the whole of the last decade, despite consistently generating good profits and reserves.

A cynosure of all eyes, MRF found itself lost in the maze of old economy stocks in the last three years, after the new economy shares simply ruled the stock markets, pushing everything else behind. With the focus back on the old economy, MRF is again beginning to look attractive, say analysts and investors. At the current price, its P/E ratio continues to be less than five.